Treasuries gain for first time in three days as confidence drops

Treasuries rose for the first time in three days after an unexpected decline in a gauge of U.S. consumer confidence cast doubt over the strength of the recovery in the world’s biggest economy.

Benchmark 10-year yields dropped briefly below 2%, a level where they last closed on March 7. The Federal Reserve purchased $5.2 billion of Treasuries today in a program to bolster economic growth. China increased its holdings of Treasuries in January by the most since 2011.

“The confidence data is not good,” said Tom Simons, an economist in New York at Jefferies LLC, one of the 21 primary dealers that trade with the Fed. “If you looked at all the data this week, you would think that the economy was picking up a bit of momentum. There’s been one direction of data, and this is the first move in the other direction.”

Benchmark 10-year yields fell three basis points, or 0.03 percentage point, to 2% at 1:47 p.m. New York time, and touched 1.99%, according to Bloomberg Bond Trader data. They have declined four basis points this week. The yields rose earlier to 2.04% after reaching 2.08% on March 8, the highest level since April 5.

The price of the 2% security due in February 2023 increased 1/4, or $2.50 per $1,000 face amount, to 99 31/32.

Thirty-year bond yields decreased one basis point to 3.23% after rising earlier to 3.25%. They reached 3.28% on March 8, also the highest since April 5.

Confidence Drops

The Thomson Reuters/University of Michigan preliminary sentiment index for March fell to 71.8, the lowest level since December 2011, from 77.6 in February. The gauge was projected to increase to 78, according to the median estimate of 67 economists surveyed by Bloomberg.

Stocks fell, with the Standard & Poor’s 500 Index decreasing as much as 0.5%.

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, wrote on Twitter that he still likes five- to 10-year Treasuries.

“Seasonal economic stats should slow about now,” Gross wrote in the posting.

Reports earlier this week showed U.S. retail sales climbed more than forecast and initial claims for jobless benefits unexpectedly fell. Ten- and 30-year yields reached 11-month highs on March 8 after the Labor Department said U.S. employers added 236,000 jobs last month, beating a forecast of 165,000.